Fetal-onset hydrocephalus affects 1 to 3 per 1,000 live births. It is not only a disorder of cerebrospinal fluid dynamics but also a brain disorder that corrective surgery does not ameliorate. We hypothesized that cell junction abnormalities of neural stem cells (NSCs) lead to the inseparable phenomena of fetal-onset hydrocephalus and abnormal neurogenesis. We used bromodeoxyuridine labeling, immunocytochemistry, electron microscopy, and cell culture to study the telencephalon of hydrocephalic HTx rats and correlated our findings with those in human hydrocephalic and nonhydrocephalic human fetal brains (n = 12 each). Our results suggest that abnormal expression of the intercellular junction proteins N-cadherin and connexin-43 in NSC leads to 1) disruption of the ventricular and subventricular zones, loss of NSCs and neural progenitor cells; and 2) abnormalities in neurogenesis such as periventricular heterotopias and abnormal neuroblast migration. In HTx rats, the disrupted NSC and progenitor cells are shed into the cerebrospinal fluid and can be grown into neurospheres that display intercellular junction abnormalities similar to those of NSC of the disrupted ventricular zone; nevertheless, they maintain their potential for differentiating into neurons and glia. These NSCs can be used to investigate cellular and molecular mechanisms underlying this condition, thereby opening the avenue for stem cell therapy.